Introduction to the Travel Industry
The global travel industry is comprised of a wide variety of businesses, from hotels and inns to casino resorts, trains, buses, airplanes, cruise ships, tour operators and travel bookers, both online and physical.
epidemic that began in 2020 had a dramatic impact on the travel and tourism
industry, decimating traffic, deterring passenger and guest revenues and
leading to immense financial challenges.
Many national governments stepped up with bailouts, loans and other
The World Travel
& Tourism Council (WTTC) found that the global travel and tourism industry
supported 272 million jobs on a direct basis during 2020 (down from 334 million
in 2019). The industry generated $4.67
trillion in total (direct and indirect) global contribution to GDP (gross
domestic product), down from $9.17 trillion in 2019. Business travel spending was off 61%, while
leisure spending was down 49.4%.
around the world took bankruptcy during 2020, while others received massive
government bailouts. Unfortunately,
those bailouts may not be anywhere near enough to keep some airlines in
business. Meanwhile, the entire industry
has curtailed flights and announced massive employee layoffs.
While considering the devastating year that the
travel industry had in 2020, it is worthwhile to look back at 2019, which was a
boom year for virtually all travel sectors.
In most parts of the world, prior to the Coronavirus, hotels and resorts
had been enjoying good to excellent occupancy rates, which enabled them to
raise prices, while many new properties have been built or are under
construction in promising markets.
Business travel had grown substantially in recent years, while leisure
travel had been generally strong worldwide.
Nonetheless, when middle class consumers did take a vacation, it was
generally on a carefully watched budget. At the same time, affluent travelers were
spending money freely on luxury hotels, resorts and experiences.
Prior to the Coronavirus, businesses were sending growing numbers of employees on trips, to conferences, company-wide events and client meetings. At the same time, companies were keeping a tight rein on costs. Corporate travel managers were negotiating reduced hotel and airfare rates, while relying on advanced software to help manage and track employees’ travel expenses. A growing number of business travelers were relying on Airbnb.com as a lower-cost alternative to traditional hotels.
Airlines in many parts of the world were
enjoying high occupancy rates and excellent profits. Airlines are flying aircraft that are much
more fuel-efficient than those of a few years ago, and they have streamlined
operations in all departments so that their staff levels are more efficient It is also vital to note one additional shift
in airline strategy: today, they rely
heavily on fees for services such as checked baggage, seats with extra legroom
and on-board food. This contributed
substantially to profitability.
Advanced new aircraft are bringing significant changes in the global airline industry. For example, Boeing’s highly advanced 787 enables airlines to offer great enhancements to passenger comfort with extremely long intercontinental range, while the airlines benefit from a fuel efficiency boost of about 20%. Airbus competes with similarly efficient, long-haul aircraft.
Perhaps more important was the spectacular
demand from global airlines for single aisle planes to replace older models
that are not particularly fuel-efficient.
Enormous numbers of such aircraft were on order from both Boeing and
Airbus before the pandemic.
Discount airlines remain very important players in the U.S. as well as the rest of the world. Outside the U.S., good examples include Cathay Dragon (formerly Dragonair) in China and Ryanair in Europe. Norwegian Air Shuttle has been competing fiercely with low airfares from Europe to the U.S. and elsewhere. However, the Coronavirus battered the company’s finances. Meanwhile, legacy airlines (e.g. American Airlines and British Airways) are now competing head-to-head on price with discount airlines in many cases, typically for the least-desirable seats in economy class.
E-commerce continues to play an extremely
important role in the travel sector, making booking convenient for consumers
who want to compare costs and services across multiple airlines or hotel
properties at once.
The cruise line business enjoyed solid growth before the Coronavirus pandemic. Consumers saw cruises as high-value, all-inclusive package deals, and cruise ships were nearly full at all times. Some of the newest ships, such as Royal Caribbean’s “Allure of the Seas” are among the largest passenger ships ever built. However, it was one of the most severely impacted industries do to the pandemic, as rampant passenger illness on a handful of ships gained news worldwide, and virtually the entire industry was shut down for several months.